Alternative E-Payments Gain Online Grounds
SUMMARYOnline shopping has dramatically increased over the past decade as merchants begin to offer special discounts, savings and promotions for online transactions. The question of online purchase now is not what you want to buy but how you want to pay. While security issues like identity theft and payment fraud via credit card purchases may shy some shoppers away, several alternative payment methods like PayPal, Google Checkout, Bill Me Later and RevolutionMoney are eliminating the need to enter credit card information while shopping online. According to Javelin Strategy & Research, 30% of Americans will use alternative online payment methods instead of credit cards by 2010. Reasons for using alternative payments services include greater security, convenience and flexibility among other benefits.
THE PLAY
With advances in technology and increased security, e-commerce has become a multi-billion dollar industry with approximately 39% of Americans shopping in cyberspace. However with more and more people shopping online incidences of identity theft have also increased more than 50% from 2003 and more than 15 million Americans had their financial information stolen between 2005 and 2006, according to Gartner. Those growing numbers are giving rise to alternative payment methods, traditionally reserved for those with a Visa or Mastercard. eBay’s Paypal is the leader in this field with more than 30% share of the online payment market and the service processed $12.2 billion in the third quarter, a 34% increase over last year. Google Checkout launched last year is similar to PayPal in that they implement the strategy of storing user’s credit card information so that they don’t need to re-enter it when shopping online.
Bill Me Later is another e-payment option that sends customers a monthly bill and lets them pay by check or money order. That simply means, merchants are paid by Bill Me Later for the transaction to be shipped to consumers and Bill Me Later then collects money from consumers later on. Recently launched service, Revolution Money offers customers both online money transfer and credit cards. The RevolutionCard is a low rate credit card product which is PIN-based for greater control and security. If cards are lost or stolen any unauthorized user must know the PIN number to make purchases. The company also charges 25% lower than the industry average for transaction fees and has plans to promote its services on social networking sites and AOL’s AIM Instant Messenger.
As the holiday shopping season continues, many of these online alternative payment services are teaming up with retail merchants offering the best deals. PayPal is offering 20% rebates on purchases at online retail stores like Barnes & Noble, Dell, Toys R Us and Blue Nile among others. Google Checkout is giving free shipping on purchases of $50 or more with certain merchants. In addition, users can earn two frequent-flier miles on participating airlines including United Airlines and Continental Airlines for every dollar spent using the service through Dec 31. Alternatively, several merchants including Wal-Mart and Brookstone are providing free shipping to Bill Me Later users and customers can wait up to 90 days to pay for purchases, in some cases, six months without paying.
The rise of alternative online payment methods is a win-win situation for all parties concerned - payment providers earn transaction fees; merchants realize higher revenues and shoppers can safely shop online without fear of ID theft or fraud.
Resources: New York Times, Business Week, USA Today
Bob Rattivarakorn
Trends Research Analyst
RarePlay
